The impact is immediate: For the first time, Wendy's will have a major ad presence on network TV in the month of January.
"It's going to be a very aggressive year for us," said Don Calhoon, senior VP-corporate marketing for the nation's third-largest burger chain.
Traditionally, Wendy's has sat out of the network burger wars in January, instead hoarding funds for the rest of the year. January is typically a tough month for fast-food chains and fancier eateries because consumers tend to stay home after eating and spending too much in December.
Wendy's spending increase comes as it ramps up unit expansion. The restaurant company is slated to announce to franchisees early next month a financial package to spur growth. Wendy's plans to increase its restaurant count by 15% in 1999 by some 675 total units worldwide.
The Wendy's spokesman declined to provide next January's ad budget. He said overall spending for 1999 will jump about 20%.
That would bring the chain's media budget above $200 million for the year, based on its spending of $172 million in 1997 and $96 million spent in the first half of '98, according to Competitive Media Reporting.
Even with the Coca-Cola in-fusion, however, Wendy's annual spending is still dwarfed by McDonald's Corp.'s $578 million budget and Burger King Corp.'s $423 million '97 spending arsenal. McDonald's spent $280 million and Burger King $186 million in the first half of '98.
This past January, Burger King and McDonald's spent nearly three times as much on media as Wendy's. The chain spent $3 million on network TV for the month, while McDonald's and Burger King spent $15 million and $13.4 million respectively, according to CMR.
COCA-COLA ADDS UP TO $100 MIL
In August, Coca-Cola agreed to ante up additional ad dollars over the next decade in exchange for exclusive rights to pour its brands in Wendy's 4,588 U.S. restaurants. Terms were not disclosed, but industry observers estimate the 10-year deal is worth between $45 million and $100 million for Wendy's.
Coca-Cola doesn't plan to grab the spotlight from Wendy's popular spokesman, Dave Thomas. The chain's founder will continue to appear in Wendy's long-running ad campaign from Bates USA, New York.
"You're not going to see all of a sudden, `This ad sponsored by Coke,'*" the Wendy's spokesman said.
FOUNTAIN BATTLE INTENSIFIES
The Coca-Cola contract comes as the battle for fountain beverage accounts intensifies. Pepsi-Cola Co. still has contracts with some 700 franchised Wendy's restaurants, which expire over the next several years. Until then, the units are free to pour Pepsi products.
Mitchell Speiser, an analyst at Lehman Bros., said the increased spending will be good for the brand.
"Dave strikes a chord with consumers. He really personifies the Wendy's experience. The more viewers they can hit, the better it will be for the brand," he said.
Wendy's posted $4.6 billion in U.S. sales last year, up 7.4% from '96, according to consultancy Technomic. For the most recent quarter, the company, which also operates the Tim Hortons doughnut chain, posted worldwide system sales of $1.74 billion, up 8.7% from a year ago.